Which one of the following is not a feature of “Value Added Tax”?
Answer & explanation
Answer: (d) It is basically subject of the Central Government and the State Governments are only a facilitator for its successful implementation
Option (d) is the answer. VAT in India was a State-level tax, designed by the States through the Empowered Committee of State Finance Ministers and introduced from 1 April 2005. The Centre only facilitated it, for example by compensating States for revenue loss. Option (d) reverses these roles, so it is not a feature of VAT.
- ✗ (a) This is a genuine feature. State-level VAT is a multi-point tax, levied at every stage of sale. It is destination-based, so the tax accrues where the goods are finally consumed.
- ✗ (b) This is a genuine feature. VAT is charged on the value added at each stage of the production and distribution chain, and input tax credit prevents cascading.
- ✗ (c) This is a genuine feature. VAT is meant to tax consumption, not sales by traders. The credit mechanism passes the tax down so that the ultimate consumer bears it.
- ✓ (d) This is not a feature of VAT. Sales tax was a State subject, and VAT was designed and implemented by the States through their Empowered Committee. The Centre's role was to facilitate, for example by compensating States for revenue loss in the transition years.
Remember · State-level VAT is a multi-point, destination-based tax on value addition with input tax credit. It replaced State sales tax, with implementation agreed from 1 April 2005. The States ran it, and the Centre only facilitated.
Sources
- Economic Survey 2004-05, Chapter 2: State level reforms (Value added tax) ↗ “it was agreed to implement State level VAT from April 1, 2005. … taxes on commodities and services must be based on consumption (on consumers) and not on sales (traders).”
Question: UPSC Civil Services (Preliminary) 2011, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
